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Wednesday, July 25, 2012

British recession deepens as economy shrinks 0.7% in Q2

LONDON : Britain's
economy shrank by a worse-than-expected 0.7 per cent in the second
quarter, official data showed on Wednesday, as recession tightened its
grip.

The economy shrank 0.7 per cent between April and June, the
Office for National Statistics said, blaming the downturn on steep
falls in the construction and manufacturing sectors.

That was far worse than market expectations for a 0.3-per cent contraction, according to analysts polled by Dow Jones Newswires.

"We
all know the country has deep-rooted economic problems and these
disappointing figures confirm that," said British finance minister
George Osborne in reaction to the data.

He added: "We're dealing
with our debts at home and the debt crisis abroad ... but given what's
happening in the world we need a relentless focus on the economy."

Britain
was already in recession after posting two successive negative quarters
since late 2011. The economy shrank 0.4 per cent in the fourth quarter
of last year and by 0.3 per cent in the first quarter of 2012.

"This really is a very nasty surprise indeed," said IHS Global Insight economist Howard Archer, in response to Wednesday's news.

"GDP
contraction of 0.7 per cent quarter-on-quarter in the second quarter is
far deeper than anyone expected and is a very disappointing and
worrying performance.

"Plunging construction and manufacturing
output weighed down heavily on the economy while service sector activity
also contracted marginally."

The downbeat data was published two
days before the 2012 Olympic Games opens in London, an event many hope
will give a boost to the struggling economy.

"The economy should be able to return to growth in the third quarter, helped by the Olympics," Archer noted.